Retail Business and Consumer Environment - Essay Example

Retail Business and Consumer Environment Introduction: Retail, long regarded as a low-margin and tough industry, has been characterized by turf battle and waves of innovation, because companies concentrate on consumer tastes and revamp business models to reduce overhead expenses, as well as tap new business hubs. Retail executives are routinely grappled with several critical decisions like where to locate their stores, which products to stock, what to be done with supply chains, how to open up new sales channels, and how to build customer loyalty avenues. “Retail executives need to be idea people as well as analysts. After all, success in retailing is the result of sensitive perceptive decisions that require imaginative and innovative techniques. For example as the American economy continued in its slow down a few years ago, many retailers were afraid to embrace new ideas. Instead of using their creative power to increase their competitive advantage, these retailers either just continued doing things as they always had done them ,cut costs without thinking about the impact on customer satisfaction or copied what their competitors were doing” (Dunne 2008). These decisions are complicated by business environment because of low margins, high capital requirements, often or cyclical consumer demands. In recent years, retailers have turned to new information technologies to fight with these challenges. Indeed, the latest generation of retail application has become, and continues to be, a game changer in this industry. Studies show that those retailers deploying advanced technology solutions realize significant shareholder returns on average, with the help of technology driven improvements like enhanced customer loyalty, efficient sales channels, advanced supply chain operations, and more agile merchandising. “Three fundamental and interrelated changes have occurred in European retail environment: first, the balance of power has shifted along the distribution channels from the manufactures to the retailers, secondly, traditional independent retailers and cooperative have lost market share to multiple chain organizations, thirdly, markets have become increasingly consolidated and concentrated” (Gilbert 2003). Long term business success is becoming more complex, for example, new technologies make it possible for companies to compete for customers in multiple sales channels and venues, including those on the phone, and on the web, allowing retailers to gain market share. The retails need the capacity to serve customers anytime and anywhere. Here is the relevance in the study of retail business and the consumer environment. Starting with a brief description of retail business, going through the political, socio, economic, cultural factors effecting consumption patterns by applying appropriate theories of retail development in needed portions, it further explains the implication of retailing in urban development, and how advanced technologies can help retail industry to gain market share. When one observes the international retail market, for example, in the United States, the retail industry originated from a community shop where people would shop for necessity items. Single general stores were common because of limited population, and the disconnectivity of the people within the city. Later societies advanced with population increase went to big cities; and new technologies enabled to enhance interconnectivity among people, and easy communication between distanced cities gave further opportunities for the formation of specialty stores. In the current scenario, the US retail industry is booming. With this exponential growth of retail business across the nation can in the very near future come into the category of infrastructure industry. Adaptation is an important fact in retail industry as trends in society, taste of variety products, and people’s demand are more. In business to business market, managing customer relations and fulfilling their need is a vital factors. Customer is the main focus. Retailing is the term for collective selling from different retail sectors of business, either from a permanent market, regular market or even peddling of goods. As a result of advanced technology, informed and price sensitive customers have become the most vital asset of any successful retailer today. Information technology has developed as the most important tool and equipment for retailers. “In the retail industry transformation, technology has a huge impact. International retailing is by its very nature long term and cannot be expected to reap the greatest rewards immediately” (Fernie 2005). Content: In a marketing assessment, the terms political, economical, socio cultural and technological play a vital role. “The retailer needs to develop its business plan within the political, economic, social and economical contexts of its activities as these effects demand and supply conditions in the market” (Newman 2002). These factors provide an overview of the external environmental factors for the company, as well as the country, when they do market research. These factors are influence very much consumption pattern also. “PEST analysis can be help to detect trends in external environment that will ultimately find their way in to the competitive environment. It provides a link between general and competitive environments in that weak signals in the general environment can become key forces for change in the competitive environment” (Hentry 2008). Political factors arise from the government or the political pressure group, which normally includes law, safety, and environment health etc. It actually means how much the government intervenes in the economical environment. Political environment means the outer political conditions in which the marketing activities are carried out. Whether a country’s political situation is strong or weak, it will affect marketing enterprises. If the political situation in a country is steady, people can live peacefully or work easily or satisfactorily, and there will definitely be a good environment for marketing activity. In case of social disorder, or social conflict, it affects market stability, and consequently economic development will be greatly damaged. The influence of such a political environment mainly appears n the form of government, policies such as price policy, population policy, energy policy, currency policy, tax policy etc. For instance, if the state reduces bank interest it result in the expansion of public consumption. If government levies personal income tax, it regulates the gap between consumers income, thus influencing public consumption. In supplier-retailer relationships, the impact of retailers’ influences upon politics and politics upon retailers become more important. If anyone has doubt in the potential influence of retailers, he should remember their ability to exercise real potential power. That will be in two ways. One way is direct influence on the consumer –shopper in store, and through direct impact upon the economy. Economical environment refers to the economical situations beyond the marketing activities. “Changes in the national economic environment are thoroughly discussed in the business sections of most newspapers and should be sufficiently familiar to the reader to illustrate the general problem of uncertainty” (Simmons 1990). Market is not simply made up of population. People need to own a degree of purchasing capacity. This level of purchasing capacity is the main factor which can determine or form markets. It mainly consists of the change of consumers income level, expenditure mode and consumption structure, change of situation in consumers’ loan, savings etc. Consumers’ income consists of salary, bonus, rent and retirement pension etc. Consumers’ purchasing capacity normally comes from income, but purchasing power is only a part of income. In income for consumption research attention must be paid to GNP, Percapita national income, family income, and disposable personal income. For example, if we consider international retailing, “domestic consumption growth in Japan suggests that exports will play a less significant role in Japan’s economic health” (Ball et al 2009). If there is any change in consumers’ income correspondingly, their expenditure mode also change, which leads to a change in the area’s consumption structure and that of the country. It is impossible for consumers to spend all their income and, therefore, a part of the money will be saved, when saving rises, there will be a significant reduction in real consumption but there will be a rise in potential consumption. “Over the last two decades, consumption pattern and life style in the UK have become more differentiated and less easily defined by social status” (Hardill et al 2001). Marketing professionals should know consumers’ saving situations. The concept of social marketing refers to the business activities which should satisfy society, and be acceptable to targeted consumer groups. It can be defined simply as the study of markets or marketing activities within a social system. If a group of consumers with approximately the same income is considered, their behavioral patterns and life styles vary markedly, as these will reflect the social class to which they actually belong. Social or cultural change is normally found in changing tastes, changing priorities, and purchasing behaviors. Cultural influences give every society its particular attributes. The norms and values of the society are the byproducts of many years’ cultural conditioning. Therefore, the cause and effects of cultural change and the norms and values within a society become topics of special interest to retail marketers. “It is also increasingly recognized that marketing has a role to play at the societal level in stimulating additional support of the voluntary sector. In the UK, the governments’ new giving campaign is already focusing on using marketing tools and techniques to persuade more organizations to support charity and to encourage a greater proportion of the general public to give” (Ewing 2001). The largest dramatic force that influences business destiny is technological change. It has given access to the internet, and one can send documents from company to company, at relatively less expense. The rate of development keeps increasing because technologists and scientists learn from what has happened in the past, with a sense that they are on top of the marketing world at present. These kind of advanced technologies are meant change the nature of retail marketing, and even other businesses. This enables the consumers to do shopping easily. They can update easily their information on products in the part; so, their demands also vary day by day. Many retail firms, in order to differentiate their products, reduce their costs, depending more on computer based technologies. Some of the developments in business related computer technology helps the marketer to be much more market oriented or customer focused. “Retailing is becoming more and more technology driven and competitive; decisions will have to be taken instantly” (Krafft 2006). Because of the needs the consumer changed and grew in 1970s, the business world saw the emergence of commodity specialized mass merchandizes. Also in the 70s, with the emergence of barcode, the use of technology made its entry in retail business, and in 1980s specialty stores developed. In late 20th century, shopping malls came in existence to cater the needs of the consumers under a roof. In Asian countries, many malls have house arcades, swimming pools, and amusement parks. Retail development can be seen at from a theoretical perspective though no single theory is applicable universally. The application cans various from market to market, depending on the level of socio economic conditions, and level of maturity in that market. The theory helps to explain the process of retail development which revolves around the creation of a sustainable competitive advantage, relevance of competitive pressure, and the investments in organizational capabilities. It requires strategic planning implementations. Growth can be considered as a result of realizing market signals and responding to the opportunities. Theories of retail development can be classified as environmental, cyclical, and conflicting. If a change in retail business is attributed to the change in the environment where the retailer operates, it is called environmental. If changes follow a pattern which is cyclical and conflicts means the conflating it or competition between two retailers which leads a new format. Retail institutions are called economic entities, and it confronts an environment which is made up of customers, changing technologies, and competitors. This environment can change the profitability of a single retailer, as well as a group. For example, the decline of department stores in western markets is attributed to the inability of those retailers to react positively and quickly to environmental change. Those retailers who successfully adapt to economic, demographic, technological, and legal changes attain great success. “The ability to adapt to change successfully is at the core of this theory” (Pradhan 2009). The regeneration of urban areas demonstrated by new development and population gains in the past few years shows clear success stories of how well some cities are doing in marketing their communities. City officials and planners can provide the correct data which include demographics and buying power, the real value of urban population will be understood. “Principles of urban retail planning and development offer urban planners urban designers, and architects a comprehensive and current guide for meeting these challenges” (Gibbs 2012). Suburban market is more homogeneous, enabling repeated use of models to identify good opportunities. The dynamics of these activities in urban areas are different from those of suburban areas. So, different measures can be used. There is a strong need to documents and build models for urban development .If they are not positioned properly in the modern competitive global economy, with a good data, public policy, and models, urban markets will suffer. To uncover hidden domestic opportunities, urban markets retailers must view through proper models. Local governments and state governments must involve in activities of marketing their cities. “Responsible land planning is not simply a matter of assembling picturesque urban villages or laying out well designed high density towns and urban districts. Rather sustainable development and vibrant community life are only possible with a robust commercial life” (Gibbs 2012). Most of the retailers empower their employees with advanced technology as touch points, to help their business to gain market share. They try to provide a range of technologies with relevant, timely information such as self service kiosks, digital signage, mobile devices and advanced point of sale systems. Through these methods, retailers can increase productivity, and they can also boost opportunities of multi channeling. For example, HP, the world’s largest technology company enables new possibilities for technology, which serves as a meaningful impact on business, people, society and governments. “Greater use of in-store technology to make shopping speedier seven out of ten consumers in both the US (71 percent) and the UK (69 percent) believe that technology will make shopping easier, quicker and less stressful” (Lewis n.d). Multi channel marketing is a booming technology which helps retailers gain opportunities to deliver their products to the customers. This enables retailers to gain profitability and revenue. Multi channel retailing can be simply defined as a means of selling to the public, via more than one distribution channel such as online, bricks and mortar stores; and mail order catalogues, via mobile technology. The increasing use of internet has led to technological extension, expansion of supplying and ordering possibilities and to the creation of new suppliers like internet retailers. Moreover, the subject of multichanneling retailing has acquired increasing significance and new level of topicality. The internet and other media such as interactive television, mobile telephone can be allied to retail selling ,these type of new or future distribution channels have the potential to create new or changing needs of the consumers through their experience with the new forms of retailing. “Multi channel retailing enables consumers to conveniently shop in a number of ways, including stores, catalogs, website kiosks, and even PDA with web access” (Evans 2007). Conclusions: In the current scenario, retail industry is booming world widely. If a business fails to meet market demands, it gets eliminated from the business it practices. So, adaption is one of the most significant aspects of retail business, as people demand more in accordance with the trends of the society, as well as the changes in the product variety. PEST analysis is a very important term in retail industry. Political, economic, socio cultural and technological influences affect the consumption pattern. These factors provide an overview of the outside environment which is very essential for the company or the country, when they do market research. Political factor originates from the government. Economical factor is about the state of national economy which includes the decision of the company or businessman affecting market. Socio-cultural factor means the factor from customers and social environment. It speaks about the situation of the citizens pertaining to population, age distribution, educational level etc. Technological factor is all about technology and how technology can support the product, or the price of the product. The application of each retail development can be seen from a theoretical perspective. Theories vary from market to market, depending on the socio-economic conditions and level of maturity in that particular market. Urban markets will suffer if they are not positioned properly in the modern challenging global economy with better data, good models, and supportive public policy. To reveal hidden, domestic opportunities, retailers must view urban markets through proper models. In retail industry technology provides new dimensions of work culture. With high ended computers and automated machines making the task simpler, the focus of the retailers can be to retain customers through new strategies. Use of technology can be extended to home shopping, telemarketing, and direct mails. One of the biggest challenges in today’s retail market regardless of single or multichannel retailer is customer loyalty. Different channels creates different advantageous for consumers, such channels provide varying measure information, entertainment, access security, interaction and so on. When appropriately formulated, multichannel systems in retailing make a positive impact on consumers. They use different channels more frequently. Multi channel retailers can reach out to more customers, even if the chance of getting it wrong is greater. On the whole, consumer demand is the prime reason for the emergence of various retail formats. Reference List Ball, D.A. et al (2009). International Business the Challenge of Global Competition. Tata McGraw-Hill edition. Available at [Accessed on 9 May]. Dunne, P.M. et al (2008). Retailing Seventh Edition. National Retail Federation. Available at [Accessed on 9 May]. Evans, J.R. & Berman, B. (2007). Tenth Edition Retail Management a Strategic Approach. Pearson Education. Available at [Accessed on 9 May]. Ewing, M.T. (2001). Social Marketing. Best Business Books. Available at [Accessed on 9 May]. Fernie, J. (2005). International Journal of Retail & Distribution Management. Emeraldinsite.com. Available at [Accessed on 9 May]. Gibbs, R.J. (2012). Principles of Urban Retail Planning and Development. WILEY. 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